$17,800,000 Non-Recourse Bridge Loan to Stabilize a 60,500 sf Retail Shopping Center

Transaction Description:

George Smith Partners secured a $11,200,000 non-recourse bridge refinance with cash-out for a two-story retail plaza in the heart of Koreatown in Los Angeles, CA. Located next to a Metro D (Purple) Line subway station along a very busy stretch of Wilshire Boulevard, the Property is anchored by 7-Eleven and Carl’s Jr. and features a fast-casual food hall on the second floor. However, the food hall has been closed due to COVID.

The Sponsor, a prolific developer and property owner, recently announced plans to replace the plaza with a 17-story, mixed-use apartment tower that includes affordable units and some commercial space. GSP was engaged to source a bridge solution to pay off the existing maturing loan and provide prepayment flexibility once the Project’s entitlements and permits are secured.

GSP focused on the strength of the Sponsor, the bustling and densely populated Koreatown market, home to several large and small-scale projects currently planned or under construction and the Purple Line Extension project which will provide a dependable, high-speed alternative for travel between downtown Los Angeles, Miracle Mile, Beverly Hills and Westwood. The financing closed within 11 days of the term sheet being signed.

Transaction Description:
George Smith Partners successfully arranged $13,155,000 in non-recourse bridge financing for a 20,000 sf shopping center in Orange County, CA. The Sponsor has invested over $10,000,000 in renovating the Property and it now it is currently 91% occupied.

Challenge:
The Subject Shopping Center has undergone significant reposition in tenant makeup and revenue. As of the date of funding the Center was 91% leased, but several of the tenants were in the process of building out their TIs and had not moved into the Property. Banks, insurance companies, CMBS lenders and credit unions requested more seasoning from our Sponsor. Debt funds and hard money lenders did not want to provide enough proceeds. The financing was too early for a perm lender who would want to see the seasoned cash-flow, and too late for most bridge lenders who would want to fund the actual construction and renovation without releasing cash out to the Sponsor.

Solution:
The Sponsor had many goals which included the reposition of the center, the sale of the center, and financing that allowed the Sponsor to pull cash out to sustain him during the sale process allowing him to receive back some of the value added to the Property. GSP was able to provide a solution for the Sponsor with a Midwest-based debt fund that allowed cash out for working capital of over $3,000,000 in less than 15 days. With GSP’s help, the Lender understood the ultimate value of the Property, was able to get comfortable with the large cash-out and give the Sponsor what they needed to complete the final stages of their plan and sell the Property.

Transaction Description:

George Smith Partners secured $101,300,000 in non-recourse bridge debt to refinance out an existing senior loan and mezzanine loan for a regional Southern California shopping center. The Property is a 373,000 square foot open-air, dual grocery anchored shopping center currently midway through a center-wide reposition. The Property is 96% leased but requires additional funds to complete the stabilization, including the construction of a new pre-leased pad building. The Center required a major leasing and re-leasing effort to modernize the 37 acre site into a true lifestyle center. Loan proceeds repaid the existing financing, covered closing costs, and will fund 100% of future CapEx, tenant improvement, and leasing commission costs associated with stabilizing the Property. The loan offers a 24-month initial term plus three extension options with durations of one year each, which provide the Borrower maximum flexibility. The non-recourse floating-rate loan priced at 3.20% over One-Month LIBOR and offered full term interest only payments.

Transaction Description:

George Smith Partners successfully arranged a $6,350,000 bridge refinancing for a fully occupied un-anchored, 7-tenant retail center located in downtown San Mateo, California. The Property has a total net rentable area of 13,303 SF. Tenants include a convenience store and local restaurants. The Sponsor will utilize a portion of the loan proceeds to pay off existing lenders, and the rest of the proceeds will be invested into other investments. The Sponsor’s preferred exit is to sell the Subject Property through a 1031 exchange.

Challenges:

All tenants are on short-term or month-to-month leases by the time of funding. Although lacking a strong cash flow, the Sponsor requested maximum cash out. As a result of rising interest rates, several capital providers passed on this opportunity because the Property’s cash flow becomes tighter after applying a higher underwriting rate. The underwritten value was affected by a high debt service coverage ratio as the Property is classified as “un-anchored”. In addition, capital providers challenged the Property’s low capitalization rate given it is located on a busy corner with a signal in a downtown area.

Solution:

GSP identified an asset based private money lender who offers simple and quick closing without requiring an appraisal or third party reports. GSP worked with the Lender to structure a 24-month loan, fixed at 6.90% (months 1-12) and 7.90% (months 13-24), interest only payments, no upfront TI/LC holdbacks and on-going reserves. There is no prepayment penalty.

Transaction Description
George Smith Partners secured a $3,000,000 non-recourse bridge loan to demolish and begin the redevelopment of a fire damaged retail building on a prime corner in Downtown Los Angeles. After the fire, the sponsor decided to demolish and rezone the property. The long term plan is to redevelop the property into a mixed use building with ground floor retail, office, and condos. GSP used its experience and relationships to identify a private money lender who could understand the greater value of the project and was able to demonstrate both the inherent value of the property due to its extraordinary location as well as the future value of the project as completed. The lender was able to close in 5 days. The interest only loan is priced at 7.99% and represents 55% of the property’s current value. The loan has a 1-year term with a 1-year extension option and no prepayment penalty.